Dynegy Issues Open Letter to Stockholders

Dynegy’s Board of Directors Recommends Stockholders Vote FOR the
Merger Agreement with Blackstone at November 17, 2010 Special Meeting of
Stockholders

November 08, 2010 08:30 AM Eastern Standard Time

HOUSTON--(BUSINESS WIRE)--Dynegy Inc. (NYSE: DYN) announced today that it has issued an open
letter to stockholders in connection with Dynegy’s November 17, 2010
Special Meeting of Stockholders.

Following is the text of the letter from Bruce A. Williamson, Chairman,
President and CEO:

November 8, 2010

Dear Stockholders:

Seneca Capital recently filed definitive proxy materials with the SEC,
as well as a slide presentation, to solicit votes against the Blackstone
transaction, which offers stockholders a 62% premium to the price at
which Dynegy’s shares were trading immediately prior to the transaction
announcement on August 13, 2010. Dynegy believes Seneca’s materials
contain numerous errors and misleading information.

Dynegy believes Seneca is advocating a reckless strategy of turning down
the certainty and cash premium value offered by the Blackstone
transaction in the hope that natural gas prices improve dramatically
above that which is currently anticipated by the market. Dynegy cautions
all stockholders to carefully consider the following about Seneca’s
solicitation:

“[F]undamentals seem to have deteriorated since announcement, with
the average price for natural gas on the 5-year forward curve
having decreased 7.1% and analysts having cut their estimates. Based
on the historical relationship with peers and the current
consensus 2011 EBITDA estimates, the stock standalone value would
be $2.66.” (emphasis added)

Dynegy notes that the Blackstone offer of $4.50 per share in cash
represents a 69% premium to this ISS estimated share price.

In addition:

Seneca does not address very real and near-term risks to Dynegy, such
as its liquidity, high leverage and refinancing risks;

Seneca claims that the natural gas price cycle is at a bottom,
ignoring the increasing supply and continued decline in price, even
since the announcement of the Blackstone transaction;

Seneca grossly oversimplifies the timing of the EPA Clean Air rules,
disregarding the ongoing, uncertain political process and the
likelihood that years will pass before plants are shut down after
regulations are put in place;

Seneca does not accurately calculate its Sum-of-the-Parts analysis of
Dynegy as a going concern company – including using optimistic asset
valuations and excluding environmental capital expenditures. In
contrast, Goldman, Sachs & Co. AND
Greenhill & Co., LLC both independently determined that Blackstone’s
$4.50 per share offer is fair to Dynegy stockholders from a financial
point of view;

Seneca’s analysis of Dynegy’s free cash flow is wrong and misleading.
It ignores basic cash flows like interest expense, debt service,
environmental obligations and lease expense that simply must be paid
before cash is available to common stockholders; and

Seneca’s attacks on Dynegy’s Board and management team are not
supported by the facts and appear desperate, ill-informed and are
reflective of Seneca’s limited understanding of running a public
company.

SENECA’S OPPOSITION IS BUILTON A FOUNDATION OF
MISINFORMATION

Seneca’s solution to Dynegy’s liquidity
challenges appears to be for Dynegy to issue more debt:Unfortunately,
given that Dynegy is already levered at roughly 10x EBITDA (peer group
leverage is approximately 3.5x-6.5x EBITDA), adding more debt is not a
practical solution and IT DOES NOT
enhance value for stockholders, as Dynegy’s interest and debt service
would increase substantially – increasing projected current negative
cash flows (which are currently projected at $1.6 billion over the next
five years – or over 3x Dynegy’s current market capitalization – using
September 7, 2010 pricing). Any new debt Dynegy could issue would be on
top of, and likely with maturities prior to, Dynegy’s upcoming 2015
maturities. The bottom line is that additional debt will be difficult
to obtain, likely contain covenants that would significantly limit
future flexibility and only push out the timing of cash flows available
to stockholders.

Seneca claims an improvement in natural gas
prices is “in sight”:Seneca appears to ignore
the fact that the anticipated timing to realize the upside of the sector
has been significantly delayed due to the recession and the significant
decline in energy prices driven by the large quantities of gas being
developed. Forward natural gas prices have declined steadily over the
past two years and have continued to fall (approximately 7%) since the
Blackstone transaction was announced. Currently, Dynegy believes that
there is no near-term recovery in sight for natural gas prices, and the
abundance of gas appears to be a long-term driver of gas prices. No one,
including Seneca, knows what future commodity prices will actually be,
but forward price curves represent a broad-based, collective market
judgment as to the most likely future prices. Seneca provides no
substantive basis for why it believes natural gas prices will make a
dramatic turnaround beyond that which is currently anticipated by the
market.Seneca may be willing to wager on the hope that natural
gas prices turn around and, by extension, Dynegy’s cash flow, stock
price and future; however, Dynegy believes such a strategy is reckless
and not in the best interest of Dynegy and its stockholders.

Seneca grossly oversimplifies the timing of the
effects of future environmental regulation, and there is no certainty as
to the scope of the regulations themselves: Seneca claims EPA
Clean Air rules, which could increase the price of electricity, are
“right around the corner.” The reality is that no one, including
Seneca, is certain of when or if EPA Clean Air rules will be approved,
what form they will ultimately take, and, even after approval, when
those rules would be implemented. Seneca’s analysis also ignores the
fact that it will likely take years before plants are shut down after
any regulations are put in place.

Seneca’s valuation of Dynegy at $6.50 per share
today is based on incomplete assumptions and belied by the lack of any
acquisition interest other than Blackstone at the $4.50 per share level:Seneca’s Sum-of-the-Parts (“SOTP”) analysis of Dynegy is misleading
and contains numerous errors (for example, excluding environmental
capital expenditures). After correcting Seneca’s SOTP analysis for its
factual errors AND even assuming
Seneca’s optimistic asset valuations, that calculation would yield a
negative per share value for Dynegy.

Seneca’s analysis of Dynegy’s free cash flow is
INCORRECT: What Seneca asserts as Dynegy’s free cash flow
available to stockholders disregards interest expense, debt service,
including lease expense, and environmental capital expenditures totaling
approximately $2.2 billion. These are contractual obligations for
Dynegy, NOT discretionary items and
they MUST be paid before cash is
available or “free” for stockholders. Thus, rather than generating
distributable free cash flow as Seneca alleges, Dynegy has projected
$1.6 billion of NEGATIVE free cash
flow over the next five years using September 7, 2010 pricing. Dynegy
believes this misstatement is an attempt by Seneca to mislead investors.

Seneca contends that management has a conflict
of interest in advocating for the transaction with Blackstone:
In addition to having equity interests in Dynegy that align its interest
in maximizing stockholder value with those of Dynegy’s other
stockholders, Dynegy’s management currently has no arrangement in place
to continue with Dynegy if the Blackstone transaction is completed nor
to rollover its equity into the company once it is private. Importantly,
if Dynegy were to trade at Seneca’s target price, management’s long-term
incentives would yield far greater value than they will on closing of
the Blackstone transaction.

Seneca’s attacks on Dynegy’s management appear
desperate and ill-informed: While Dynegy management believes
that the Blackstone transaction is the best alternative for
stockholders, it is the Dynegy Board of Directors, NOT
Dynegy’s management, that approved the merger agreement and is
recommending Dynegy stockholders vote FOR
the proposal to adopt the merger agreement. Dynegy’s management is
covered by standard change in control plans that were approved by
Dynegy’s Board and have been in place and publicly disclosed for several
years, and are consistent with those of similarly situated public
companies. The severance provisions of these plans are “double
trigger” – that is, they are triggered only if both a change
in control and an involuntary or “good reason” termination occur. As
described in the definitive proxy statement, Dynegy’s Board, which is
comprised of a majority of independent directors, reviewed the potential
payments under these plans and concluded they were reasonable and would
not affect the advice from, or work performed by, management. Dynegy’s
management’s goal has been, and continues to be, maximizing value for
all Dynegy stockholders. If Dynegy’s management truly believed that a
market recovery is right around the corner, as Seneca suggests, it would
have every incentive to advocate continuing Dynegy as a stand-alone
company and achieving greater returns on its long-term incentives.

SENECA’S TRADING IN DYNEGY STOCK CONTRADICTS ITS RECENT CLAIMS ABOUT
THE VALUE OF DYNEGY

Seneca’s November 5, 2010 slide presentation claims that the current
value of Dynegy is $6.50 per share. Yet as recently as the day before
the Blackstone transaction was announced, Seneca SOLD
approximately 700,000 shares of Dynegy stock at $2.93. Since the
announcement of the Blackstone transaction, natural gas prices have
declined further causing even more pressure on Dynegy.

SENECA PROVIDES NO SPECIFIC STRATEGIC ALTERNATIVE THAT IS SUPERIOR TO
THE BLACKSTONE TRANSACTION

In addition to the errors and misinformation in its November 5, 2010
slide presentation, Seneca offers Dynegy stockholders no strategic plan.Seneca initially filed its complaints against the Blackstone
transaction on October 21, 2010 – over two months after the announcement
of the transaction. Since then, no Seneca communication – including
its most recent slide presentation – has articulated any specific
alternative that would deliver value to Dynegy stockholders superior to
that contemplated by the Blackstone transaction. Instead,
Seneca continues to recommend that Dynegy stockholders turn down the
certain cash premium inherent in the Blackstone transaction in favor of
a bet on a recovery in natural gas prices beyond that of the forward
curve, a liquid market that has billions of dollars of daily trades, as
the basis for its position. Furthermore,Seneca’s last minute
proposal to appoint two unnamed director nominees and to offer
conceptual and vague stockholder resolutions is NOT
a strategic plan. Dynegy’s Board is comprised of experienced,
dedicated and independent directors, each of whom understands the real
near- and medium-term challenges facing Dynegy that cannot be addressed
with ambiguous suggestions and potentialities like those put forth by
Seneca.

For all of these and the numerous other reasons we have been
communicating to you, Dynegy urges stockholders to take Seneca’s slide
presentation for what it is worth: a desperate attempt to
derail the Blackstone transaction based on hopes and assumptions about
future energy prices, the timing of the implementation of Clean Air
regulations, and other factors that neither Dynegy nor Seneca control.DO NOT GAMBLE YOUR DYNEGY INVESTMENT ON SENECA’S UNINFORMED GUESSES.

SENECA’S BET ON A DRAMATIC TURNAROUNDIN NATURAL GAS
PRICES ABOVE THAT ANTICIPATED BY THE MARKET (AND ALREADY EMBEDDED IN THE
DYNEGY BOARD’S ANALYSIS IN THEIR RECOMMENDATION OF BLACKSTONE’S 62%
PREMIUM OFFER)MAY WORK FOR A COMMODITY TRADER, BUT NOT FOR A
PUBLIC COMPANY

Importantly, Seneca’s slidepresentation does noteven
attempt to provide a credible solution to an obvious dilemma – what is
the survival path for Dynegy between today’s gas prices, today’s forward
natural gas curve, and 2014? 2015?2016?

Contrary to what Seneca would have you believe, Dynegy faces
significant liquidity challenges ($1.6 billion of negative free cash
flows currently projected over the next five years using September 7,
2010 pricing), and the downside risks to Dynegy of not obtaining
stockholder approval and subsequently completing the transaction with
Blackstone are substantial and real. Since the transaction was
originally approved by the Dynegy Board on August 12th, natural gas
prices have further declined approximately 7%, making it increasingly
difficult and more expensive to refinance credit facilities and, without
a waiver, these credit facilities would need to be amended, likely with
less availability and higher costs. The reality is that if the
Blackstone transaction is not approved and subsequently completed,
Dynegy, using the latest available commodity price curves, projects
potential non-compliance with certain credit facility financial
covenants based on forecasted earnings as of June 30, 2011. Absent the
Blackstone transaction, Dynegy may be forced to restructure its balance
sheet using one or a combination of several options, including issuing
equity or equity-linked securities, implementing debt for equity swaps
or selling assets at depressed prices – causing Dynegy stockholders to
face potential significant dilution and further loss on their investment.

YOUR VOTE IS IMPORTANT –PLEASE VOTE FOR THE BLACKSTONE
TRANSACTION TODAY

Your Board of Directors believes the Blackstone transaction is in the
best interest of all Dynegy stockholders because it provides immediate,
certain and fair value for your shares while reducing the considerable
downside risk facing Dynegy if the Blackstone transaction is not
approved and completed. Your Board recommends that stockholders vote FOR
the Blackstone transaction on the WHITE
proxy card today.

Your vote is extremely important, no matter how many or how few
shares you own. Please take a moment to vote FOR
the proposal to adopt the merger agreement today – by telephone,
by Internet or by signing, dating and returning the WHITE
proxy. Please discard any gold proxy cards you receive from Seneca
Capital and vote the WHITE proxy
card today.

For more information, stockholders are encouraged to read Dynegy’s
definitive proxy statement, which was filed with the SEC on October 4,
2010; an Investor Presentation that was filed with the SEC on October 5,
2010 and updates to that Investor Presentation that were filed with the
SEC on October 19, 2010, and October 27, 2010, respectively; and letters
to stockholders that were filed with the SEC and issued as press
releases on October 6, 2010, October 19, 2010, October 26, 2010, and
November 2, 2010, respectively.

Thank you for your support.

Sincerely,

/s/ Bruce A. Williamson

Bruce A. Williamson

Chairman, President and CEO

If you have any questions, require assistance in voting your shares,
or needadditional copies of Dynegy’s proxy materials,
please call MacKenzie Partners at the phone numbers listed below.

Through its subsidiaries, Dynegy Inc. produces and sells electric energy
capacity and ancillary services in key U.S. markets. The power
generation portfolio consists of approximately 12,200 megawatts of
baseload, intermediate and peaking power plants fueled by a mix of
natural gas, coal and fuel oil. For more information, please visit www.dynegy.com.

Cautionary Statement Regarding Forward-Looking Statements

This release contains statements reflecting assumptions, expectations,
projections, intentions or beliefs about future events that are intended
as "forward-looking statements". All statements included or incorporated
by reference in this release, other than statements of historical fact,
that address activities, events or developments that we or our
management expect, believe or anticipate will or may occur in the future
are forward-looking statements. These statements represent our
reasonable judgment on the future based on various factors and using
numerous assumptions and are subject to known and unknown risks,
uncertainties and other factors that could cause our actual results and
financial position to differ materially from those contemplated by the
statements. You can identify these statements by the fact that they do
not relate strictly to historical or current facts. They use words such
as "anticipate", "estimate", "project", "forecast", "plan", "may",
"will", "should", "expect" and other words of similar meaning. In
particular, these include, but are not limited to, statements relating
to the following: (i) the timing and anticipated benefits to be achieved
through our 2010-2013 company-wide cost savings program; (ii) beliefs
and assumptions relating to liquidity, available borrowing capacity and
capital resources generally; (iii) expectations regarding environmental
matters, including costs of compliance, availability and adequacy of
emission credits, and the impact of ongoing proceedings and potential
regulations or changes to current regulations, including those relating
to climate change, air emissions, cooling water intake structures, coal
combustion byproducts, and other laws and regulations to which we are,
or could become, subject; (iv) beliefs about commodity pricing and
generation volumes; (v) anticipated liquidity in the regional power and
fuel markets in which we transact, including the extent to which such
liquidity could be affected by poor economic and financial market
conditions or new regulations and any resulting impacts on financial
institutions and other current and potential counterparties; (vi)
sufficiency of, access to and costs associated with coal, fuel oil and
natural gas inventories and transportation thereof; (vii) beliefs and
assumptions about market competition, generation capacity and regional
supply and demand characteristics of the wholesale power generation
market, including the potential for a market recovery over the longer
term; (viii) the effectiveness of our strategies to capture
opportunities presented by changes in commodity prices and to manage our
exposure to energy price volatility; (ix) beliefs and assumptions about
weather and general economic conditions; (x) beliefs regarding the U.S.
economy, its trajectory and its impacts, as well as Dynegy’s stock
price; (xi) projected operating or financial results, including
anticipated cash flows from operations, revenues and profitability;
(xii) beliefs and expectations regarding the Plum Point Project; (xiii)
expectations regarding our revolver capacity, credit facility
compliance, collateral demands, capital expenditures, interest expense
and other payments; (xiv) our focus on safety and our ability to
efficiently operate our assets so as to maximize our revenue generating
opportunities and operating margins; (xv) beliefs about the outcome of
legal, regulatory, administrative and legislative matters; (xvi)
expectations and estimates regarding capital and maintenance
expenditures, including the Midwest Consent Decree and its associated
costs; and (xvii) uncertainties associated with the proposed merger of
Dynegy and an affiliate of Blackstone (the “Merger”), including
uncertainties relating to the anticipated timing of filings and
approvals relating to the Merger and the sale by an affiliate of
Blackstone of certain assets to NRG Energy, Inc. (the "NRG Sale"), the
outcome of legal proceedings that have been or may be instituted against
Dynegy and/or others relating to the Merger and/or the NRG Sale, the
expected timing of completion of the Merger and the NRG Sale, the
satisfaction of the conditions to the consummation of the Merger and the
NRG Sale and the ability to complete the Merger and the NRG Sale.

Any or all of our forward-looking statements may turn out to be wrong.
They can be affected by inaccurate assumptions or by known or unknown
risks, uncertainties and other factors, many of which are beyond our
control.

ADDITIONAL INFORMATION AND WHERE TO FIND IT

In connection with the Merger, Dynegy filed a definitive proxy statement
with the SEC on October 4, 2010, and commenced mailing the definitive
proxy statement and form of proxy to the stockholders of Dynegy. BEFORE
MAKING ANY VOTING DECISION, DYNEGY'S STOCKHOLDERS ARE URGED TO READ THE
DEFINITIVE PROXY STATEMENT REGARDING THE MERGER CAREFULLY AND IN ITS
ENTIRETY BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE PROPOSED
MERGER. Dynegy’s stockholders are able to obtain, without charge, a copy
of the definitive proxy statement and other relevant documents filed
with the SEC from the SEC’s website at http://www.sec.gov.
Dynegy’s stockholders are also able to obtain, without charge, a copy of
the definitive proxy statement and other relevant documents by directing
a request by mail or telephone to Dynegy Inc., Attn: Corporate
Secretary, 1000 Louisiana Street, Suite 5800, Houston, Texas 77002,
telephone: (713) 507-6400, or from Dynegy’s website, http://www.dynegy.com.

PARTICIPANTS IN THE SOLICITATION

Dynegy and its directors and officers may be deemed to be participants
in the solicitation of proxies from Dynegy’s stockholders with respect
to the Merger. Information about Dynegy’s directors and executive
officers and their ownership of Dynegy’s common stock is set forth in
the proxy statement for Dynegy’s 2010 Annual Meeting of Stockholders,
which was filed with the SEC on April 2, 2010. Stockholders may obtain
additional information regarding the interests of Dynegy and its
directors and executive officers in the Merger, which may be different
than those of Dynegy’s stockholders generally, by reading the definitive
proxy statement filed with the SEC on October 4, 2010 and other relevant
documents regarding the Merger when filed with the SEC.